Asked by Jasmyne Daise on Jun 15, 2024
Verified
On January 2 Angle Corporation acquired 40% of the outstanding common stock of Bobbe Company for $550000. For the year ended December 31 Bobbe reported net income of $90000 and paid cash dividends of $30000 on its common stock. At December 31 the carrying value of Angle's investment in Bobbe under the equity method is
A) $538000.
B) $550000.
C) $586000.
D) $574000.
Equity Method
An accounting technique used for recording investments in associate companies where the investor has significant influence over the investee.
Carrying Value
The book value of an asset on a company's balance sheet, derived from its original cost minus accumulated depreciation or amortization.
Net Income
The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenues.
- Conduct evaluations and input in financial journals the surpluses, financial declines, dividends remitted, and incomes from interest in investments.
- Display proficiency in the equity method for recording investments in accounting, especially when a notable degree of influence is held over the investee.
Verified Answer
Angle's share of Bobbe's net income is 40% x $90,000 = $36,000.
Angle's share of dividends received is 40% x $30,000 = $12,000.
So, the carrying value of Angle's investment in Bobbe at December 31 is:
$550,000 + $36,000 - $12,000 = $574,000. Therefore, the answer is D.
Learning Objectives
- Conduct evaluations and input in financial journals the surpluses, financial declines, dividends remitted, and incomes from interest in investments.
- Display proficiency in the equity method for recording investments in accounting, especially when a notable degree of influence is held over the investee.
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